2.1
Issues of public administration—including questions around transparency and accountability—were raised with the committee throughout the inquiry.
2.2
As discussed in the previous chapter, submitters described the serious, negative impact the rezoning of land around the new airport had on their lives. They also raised with the committee their concerns about the lack of consultation, the lack of respect shown to small landholders, as well as treatment they perceived as unfair and inequitable.
2.3
The acquisition of land in Bringelly from the Leppington Pastoral Company (LPC), colloquially known as the Leppington Triangle, was an area of particular concern to stakeholders. Several submitters pointed to the fact that the land was purchased with public money, and from a fund that was administered by public officials.
2.4
Numerous landholders were highly critical of the Leppington Triangle land acquisition, noting that while they were facing uncertainty about the value of their land, the Leppington Triangle had been purchased for approximately 10 times its commercial value. It was noted that this had led to serious community concerns about justification of such expenditure, and the inequities embedded in the land acquisition process.
2.5
The following chapter examines the acquisition process for the Leppington Triangle, and presents the findings of the ANAO, which in part suggested that the Department of Infrastructure did not exercise appropriate due diligence in its acquisition of the Leppington Triangle.
2.6
The chapter also puts forward the views of the Australian Government in response to the findings of the ANAO, and the grave concerns over the transaction voiced by inquiry participants.
Acquisition of the Leppington Triangle
2.7
On 31 July 2018, the Australian Government purchased a 12.26-hectare triangular parcel of land in Bringelly, NSW, from the LPC for $29 839 026. The acquisition process was undertaken by the Western Sydney Unit within the Department of Infrastructure. The Department of Finance provided broad procedural and process advice to the Department of Infrastructure and assisted with steps to meet the requirements of the Lands Acquisition Act 1989 (LAA).
2.8
The land, which sits next to the Western Sydney Airport site, has come to be referred to as the Leppington Triangle with its intended use to be part of a second runway for the Western Sydney Airport.
2.9
A year after the acquisition, the Department of Infrastructure’s financial statements of June 2019 (for the Financial Year 2018/19) valued the land at $3 065 000. The ANAO identified the $26 774 026 revaluation difference as a ‘significant and unusual transaction’ and commenced a performance audit of the transaction.
2.10
As well as the ANAO audit, the matter has been subject to several independent investigation and review processes, including:
Independent Review of the Leppington Triangle Acquisition: published by Sententia Consulting, 21 May 2021;
Australian Federal Police investigation into the Commonwealth of Australia’s purchase of land for the development of the Western Sydney Airport, concluded 29 September 2021;
Code of conduct report by Dr Vivienne Thom; and
Culture and capability insights: The Western Sydney Unit report: published by KPMG, June 2021.
ANAO report: Leppington Triangle purchase
2.11
On 21 September 2020, the ANAO presented its 9th report of 2020-21 to the Parliament. The performance audit report, titled Purchase of the Leppington Triangle’ land for the future development of Western Sydney Airport, made findings around the acquisition of the Leppington Triangle by the Department.
2.12
In conducting its audit, the ANAO sought:
… to examine whether the Department of Infrastructure exercised appropriate due diligence in its acquisition of the Leppington Triangle land for the future development of the Western Sydney Airport.
2.13
The report was critical of aspects of the Department’s management of the acquisition of the Leppington Triangle and raised questions around the integrity of the Department in connection with the acquisition.
2.14
The ANAO made three recommendations to the Department of Infrastructure, ‘addressing the analysis that informs spending decisions, managing probity risks and the approach to obtaining land valuations’. All three recommendations were subsequently agreed to in a response from the Department.
Commonwealth procurement framework
2.15
The acquisition of the Leppington Triangle was subject to Commonwealth Procurement Frameworks, which outline rules and ethics of officials’ administration and management of public funds, to procure goods and services needed for public programs. The ANAO reviewed the Department of Infrastructure’s administration of the acquisition within the context of the following:
Public Governance, Performance and Accountability Act 2013 (Cth)
Commonwealth Procurement Rules (CPRs)
Summary of findings
2.16
In its audit, the ANAO applied the following criteria:
Was an appropriate acquisition strategy developed?
Was an appropriate approach taken to valuing the land?
Were decision-makers appropriately advised?
2.17
On the basis of this criteria, the ANAO report made numerous and significant findings about the acquisition of the Leppington Triangle, as detailed below.
Land acquisition strategy
2.18
The Department of Infrastructure first developed a strategy to acquire the Leppington Triangle that was finalised in 2016. As outlined in the Commonwealth Government Gazette notice C2018G00092, the stated purpose for the use of the Leppington Triangle was to facilitate the:
… development and future expansion of Western Sydney Airport as envisaged by the Airport Plan for Western Sydney Airport, determined on 5 December 2016.
2.19
In examining the department’s land acquisition strategy, the ANAO took into consideration whether the exercised approach was appropriate for the department’s stated purpose. The ANAO found that the strategy was ‘not appropriate’ and that it had significant identified shortcomings, including that:
it was focussed on incentivising an unwilling seller to dispose of their land some 32 years in advance of when it was anticipated to be needed;
the underlying analysis overstated the identified benefits, did not quantify costs and did not address risks; and
the acquisition approach eventually employed departed from the approved strategy.
2.20
The ANAO reported discrepancies around why the decision to commence acquisition of the land in 2016 was made. The Australian Government had previously attempted to acquire the Leppington Triangle in 1989, as part of a broader airport land acquisition process, but was unable to reach an agreement with the LPC and subsequently determined to exclude it from the process.
2.21
The Airport Plan for Western Sydney Airport, determined by then Minister for Urban Infrastructure, the Hon. Paul Fletcher MP on 5 December 2016, authorised the Stage 1 Development of the Western Sydney Airport, which would operate upon as a single-runway airport. It included indicative long‑term designs for initial and future stages of the Airport, including the development of a second runaway. Acquisition of the Leppington Triangle land was not an immediate priority as it was not needed for Stage 1, was not expected to be needed until post 2050, and furthermore at that time, subsequent development stages had not yet been conceived or approved.
2.22
The Department had previously had dealings with LPC in the development of the Northern Road, notably by readjusting the route of this road so that it ran through Commonwealth land as opposed to through land owned by the LPC. In commencing an early purchase, the Department stated that it sought to capitalise from the ‘goodwill’ it considered had been created by this concession to the LPC. However, the ANAO noted that this was inconsistent with examined departmental records that identified the LPC as an unwilling seller, and that the strategy notably did not explain:
… the disconnect between advising that the land should be acquired early to capitalise on goodwill, while also advising that the department should incentivise LPC’s cooperation.
2.23
Regarding financial considerations, the ANAO reported that:
Appropriate consideration was not given to costs and benefits when deciding to acquire the land early.
The benefits identified by the department in its advice was questionable and there was no documented consideration of costs.
The department did not demonstrate that the benefits of acquiring, and paying for, the land some decades in advance of need outweighed the cost to the Australian Government.
2.24
Issues around probity were also reported by the ANAO. Particular concerns were voiced around whether probity requirements had been accurately followed, and also about the manner in which some direct engagements with landowners had been conducted by Department of Infrastructure staff—notably, that meetings with the LPC landowner were held in coffee shops, with no record of discussions.
2.25
In relation to these undocumented meetings, Group Executive Director, (Performance Audit Services Group) of the ANAO, Ms Lisa Rauter, summarised the ANAO’s concerns, telling the committee that:
Any meeting with a party where there is potentially a financial transaction between the Commonwealth and that party should be documented because it raises perceptions, if nothing else, about probity and potential conflicts of interest. If those discussions lead to decisions on the basis of information within the department, that should be documented.
2.26
Finally, despite the Department initially agreeing to pursue acquisition by a compulsory process, the strategy was changed to acquisition by agreement with the landholder. The ANAO noted that there was no record from a departmental decision-maker approving the change.
2.27
The Department of Infrastructure told the ANAO that the decision to change the process was ‘seen as more of a technical change within the remit of the relevant’ senior executive officer in the Department. However, the ANAO considered it to be a more significant decision with broader implications. In evidence, Mr Brian Boyd, Executive Director, (Performance Audit Service Groups of the ANAO) highlighted the ramifications to transparency of abandoning compulsory acquisition, saying that:
Had the Department of Finance progressed with that, it would have meant a delegate of the finance minister, most likely, doing the sign-off. We think that might have brought some additional scrutiny to it.
Land valuation
2.28
As part of its audit, the ANAO examined and produced findings on whether the land valuation approach undertaken by the Department was appropriate. It concluded that the valuation approach taken by the Department was ‘not appropriate’ and that it ‘inflated the value of the land’ leading the Australian Government to overpay.
2.29
The ANAO raised concerns about the single valuation of the market value of the land that was obtained jointly by the department and the LPC. The valuation was procured by M J Davis Valuations Pty Ltd (MJD), as suggested by the LPC and agreed to by the Department on the basis that were no conflicts of interests.
2.30
In evidence, Mr Boyd noted that a joint valuation for a purchase of this scale was not normal. Mr Boyd compared the transaction against other procurement projects and valuations undertaken by the Department, saying that they ‘weren’t used there either’.
2.31
Ms Rauter further explained that, whilst there may be circumstances where the department may ask the seller to submit their own valuation, such a valuation would then be subsequently compared against a Commonwealth one. Ms Rauter suggested that ‘accepting a single source valuation for such an important valuation and also accepting the valuer put forward by the seller were certainly unusual’.
2.32
The ANAO also identified that the Department gave MJD ‘inappropriate instructions on the valuation approach to be used and the basis on which the current market value of the land was to be assessed’, including that MJD use a ‘desktop valuation only’. The Department did not record why it instructed MJD to use such a valuation approach, but given that public money was at stake, the ANAO took the view that ‘procuring a Full Speaking Valuation was warranted’.
2.33
Most alarmingly, the ANAO reported that the valuer themselves expressed concerns with the instructions. Mr Boyd told the committee that:
… the valuer himself was actually raising fairly significant concerns with the department about the instructions he was being given, even to the point of actually telling the department that it should not be referring to his work as a valuation report because of the way the department had circumscribed what they would allow the valuer to do. For example, the valuer wasn't allowed to go on site. If you want a valuation, in these circumstances, you should be looking at a full speaking valuation.
2.34
The ANAO also remarked that the valuation notably relied on speculative re‑zoning potential and lacked consideration of negative factors, such as airport noise and developmental controls that may have lowered the value of the land.
2.35
On 2 August 2017, MJD submitted a draft valuation report to the Department which provided an indicative value range of the land as being between ‘$28,500,000 – $32,000,000’ as well as an ‘assessed market value at $30,000,000 or $220 per square metre’. The ANAO characterised this final valuation as a ‘restricted valuation’, due to the above-mentioned deficiencies, but noted that the Department accepted it without any edit.
2.36
In comparison, in a valuation procured by the NSW Roads and Maritime Services (RMS) in 2017, the land was valued at $50 per square metre, equating to 23 per cent of the $220 per square metre indicated by the Department’s draft valuation. While the RMS NSW valuation was shared with the Department, the ANAO noted that the Department did not take any action in response to the fact that RMS NSW had valued the land at a substantially lower amount.
2.37
The ANAO therefore formed the view that the valuation approach taken by the Department in the acquisition of the Leppington Triangle was inconsistent with both precedent within the Department itself, and with the NSW Government’s valuation approach for the same land. The ANAO concluded that the Department’s decision to spend public money based on an ‘approximate mid-point of an indicative value range that spanned $3.5 million and was derived from a Restricted Assessment’ was not shrewd and that the Department should have procured a full valuation.
2.38
Furthermore, the ANAO reported that the Department did not ‘provide the ANAO with accurate answers when questions were first asked about the valuation approach, which was not ethical behaviour’.
2.39
The absence of any reasonable explanation on the valuation approach, Mr Boyd said, is what led the ANAO to ‘reach some fairly strong conclusions around the ethics of what departmental officials had done in respect of this transaction’.
Advice to decision-makers
2.40
The ANAO made significant findings around the actions of the Department of Infrastructure, and its briefing of relevant decision-makers. The ANAO examined the extent to which decision-makers were ‘appropriately advised on the land acquisition through the provision of sufficient, relevant and reliable information’ from the Department.
2.41
Ten written briefings on the acquisition of the Leppington Triangle were submitted by the Department of Infrastructure to decision-makers across a four-year period from November 2015 to November 2019.
2.42
In its report, the ANAO concluded that decision-makers were not properly advised and was critical of the content—or lack thereof—of the written briefings. During the inquiry, representatives of the ANAO provided additional comment to the committee, and pointed out the apparent failure of decision-makers to inquire further into the why the briefings were lacking relevant information.
2.43
The ANAO specified that the advice provided in the written briefings was inadequate, unreliable, and commonly omitted (or made little reference to) relevant information such as:
The method of acquisition — decision-makers were not advised about the acquisition method changing, from a compulsory process to being acquired through agreement with the landowner. One briefing made in July 2018 incorrectly stated that it was compulsory agreement.
The purchase price — the basis on which the market value of the land was to be calculated was defined in some briefings, yet all failed to include the final value. It was not made apparent that the Department intended to pay a per hectare rate that far exceeded all known valuations of the land.
Value for money — only one of the ten briefings referred to the value for money which could be derived for the Commonwealth, from the acquisition of the Leppington Triangle. In the ANAO’s view, this represented a significant oversight as, per Commonwealth Procurement Rules, achieving value for money is a key consideration in ensuring that public resources are being used efficiently and effectively.
2.44
Considering the apparent lack of information that some of the written briefings contained, Mr Boyd further detailed some concerns around the actions of the decision-makers, saying that the Department would go to:
… the relevant deputy secretary, copying in the chief financial officer, saying, 'You should approve spending of up to $31.78 million to buy something for $30 million dollars.' So we have questions on that. Why wouldn't a decision-maker say, 'Why am I being asked to approve nearly $2 million dollars more than it's going to cost?'
… certainly when you look at the 6 March brief, the question we have is: why wouldn't a deputy secretary and a chief financial officer be asking questions about this, such as: 'You say you got a valuation, but why isn't it attached? Can I see that?' If they'd looked at the valuation report, that might have raised some concerns.
2.45
Ms Rauter expanded on this point further, and noted the requirements of the Commonwealth Procurement Rules:
The other element, I guess, is not just what the decision-makers should have asked for but the efforts that the department goes to to get best value for money for the Commonwealth. What we couldn't see in here is that all efforts were made to get the best outcome for the spending of Commonwealth money. That's something we have seen in other audits, that there is a negotiation tactic or there are comparisons with options made. We just couldn't see that effort being made to get the best value for money, for taxpayers, in this situation.
Public administration, transparency and accountability
2.46
The ANAO report enlivened public scrutiny on current Commonwealth procurement activities, which was reflected in the evidence received during the inquiry. The purchase of land in the Leppington Triangle, and the process around it, was of particular concern to a number of submitters, in terms of both the administration of public money and community perceptions and expectations around the activities of the Commonwealth.
The land purchase
2.47
At the committee’s March 2021 hearing, Mr Greg Warren MP, the NSW Shadow Minister for Western Sydney, raised concerns about the inequities embedded in the land acquisition process between small landowners, and others, saying:
… if you're one of these smaller landowners who's about to lose your home or have it devalued so much that it's worth nothing and you can't even sell it, if you open the paper and you read about a parcel of land valued at $3 million but given $30 million for it, you can only begin to imagine how those local families and residents must feel when they've invested their entire livelihood into their homes.
2.48
At its April 2021 public hearing, Mr Geoffrey Watson SC, Director of the Centre for Public Integrity (CPI), told the committee that the purchase of the land was ‘unjustifiable’. He pointed out key areas of broader concern—namely, the limitations of the ANAO and cuts to its funding, and the lack of an existing suitable federal integrity agency.
2.49
Mr Watson went on to note that the land purchase was made with public money, from a fund administered by public officials; facts which had led to serious community concerns:
On a fairly regular basis I’m asked to speak on the subject of public administration, including transparency and accountability. Since Leppington Triangle became public in September 2020, I have invariably – and by ‘invariably’ I mean every time – been asked questions regarding what went wrong regarding the sale of land for 10 times its commercial value. The repeated questioning is the clearest indication that this is a matter of disquiet to the community at large.
2.50
Mr Watson noted that there are inherent risks involved in managing projects such as the Western Sydney Airport. He argued that projects of the size and scale of the airport project – which also involve multiple levels of government – ‘inevitably run over budget and there are always problems at the edges about abuse of the contracting systems’.
Oversight and accountability
2.51
The importance of the ANAO was stressed during the inquiry, particularly regarding the unique role it plays in examining the administration of taxpayer’s money and informing Parliament of any deficient processes that are uncovered. Mr Watson remarked that:
… except for the good work of the Australian National Audit Office in identifying this issue, we wouldn't know anything about it. But, given the Audit Office conducts random audits, we do not know how many Leppington Triangles are out there that we haven't heard about.
2.52
Mr Watson argued that the ANAO must be suitably funded and resourced to continue its function as a key facilitator of accountability and transparency. Further funding of the ANAO could also lead to improvement of the Commonwealth Procurement Rules. Mr Watson commented:
Imagine if you could get the advice of the people in the Audit Office to tell you how to recraft, redraw and enforce the Commonwealth Procurement Rules. That would be a great advantage. But, at the moment, they don't have the funds to do that. Every cent that they're getting is being spent on their auditing processes, but it could take on a fantastic role in terms of advising, consultation and redrafting them.
2.53
Further, Mr Watson argued that given there were processes readily available to acquire the land at market value:
… it would be impossible in the circumstances to justify a payment that is more than market value of the land, and that a purchase at 10 times the market value of the land must show that the decision was one of two things. It had to be the product of a gross act of incompetence on the part of the public officials concerned, or it had to be the product of corruption.
2.54
When asked by the committee whether he could recommend particular measures that would make the treatment of landowners more equitable, Mr Watson said:
I am no expert in the area of contractual procurement, but I can tell you this much: what you could do is control that at that kind of level and also have an independent probity auditor who circles any of these sorts of transactions – which are certain, incidentally, to arise – so that there is a degree of fairness. … I would have thought that an independent probity auditor who was constantly engaged in looking over the shoulders of those who are in charge would be a good idea, and that’s the sort of advice which I imagine you’d get from the Audit Office or a federal integrity agency, if you had one.
2.55
Similarly, in its submission, the CPI submitted that ‘the Leppington Triangle acquisition is a case study in the weakness of existing accountability mechanisms in respect of Commonwealth procurement’.
2.56
The CPI considered that such shortcomings could be strengthened by:
addressing the weaknesses identified [in its submission] in respect of the enforcement of the Commonwealth Procurement Rules;
expanding the powers and resources of the Auditor-General and ANAO to enable them to have a greater role in ongoing monitoring of procurement processes; and
establishing a fit-for-purpose National Integrity Commission, which would be best-placed to tackle substantial and/or systemic breaches of procurement processes.
Department response
2.57
The committee sought evidence regarding the ANAO report and the nature of the transaction from the Australian Government over the course of the inquiry.
2.58
In its submission, the only reference made by the Department of Infrastructure to the ANAO report, and the transaction regarding Leppington Triangle, was a short paragraph that said:
The Department has accepted the report’s recommendations and is taking action to address shortcomings in processes and decision-making identified by the ANAO.
2.59
However, in evidence, Ms Pip Spence, then the Chief Operating Officer of the Department of Infrastructure, reaffirmed to the committee that the department took ‘the findings of the ANAO audit very seriously’.
Committee view
2.60
The purchase of the Leppington Triangle from the LPC has been subject to a number of inquiries and investigations, highlighting the significant shortfalls in public administration that the purchase represents. It is clear that this transaction has breached the social contract between the Commonwealth and the public, by not providing any clear value for money and by creating arbitrary differences between landholders with varying degrees of access to decision‑makers.
2.61
The ANAO provided clear evidence of the failings in administration by the Department of Infrastructure, in the purchase of the Leppington Triangle land. The committee supports the findings and recommendations made by the ANAO and is of the view that the Department should provide an update to the Parliament on its progress implementing the recommendations.
2.62
There has been a substantial amount of scrutiny already applied to the Leppington Triangle purchase, and the actions and failings of the Department of Infrastructure. Notwithstanding this, it is the committee’s view that the scale of the Western Sydney Airport Project, and the vast amounts of public money involved, warrants the ongoing oversight of the Project by the 47th Parliament.
2.63
The committee suggests that the Senate Rural and Regional Affairs and Transport Legislation Committee, with its ongoing oversight role of the Department of Infrastructure, continue to monitor progress of the Project and ensure—via the Estimates process—the proper allocation and use of Commonwealth funds.
2.64
It is also clear from the views put forward during this inquiry, from the serious administrative and acquisition issues around the Leppington Triangle purchase, and other recent examples of public administration (like the Commuter Car Park Fund, which this committee also examined), that a federal integrity body must be established as a matter of priority.
2.65
The incoming Labor Government has committed to establishing an independent and powerful national integrity commission. This commission will promote proper public administration and provide a vital accountability measure to rebuild public trust in the administration of Commonwealth funds. It will also ensure that any future significant Commonwealth transactions, like that of the Leppington Triangle, represent value for money for the taxpayer and adhere to the relevant Commonwealth Procurement Rules.
Senator the Hon Tim Ayres
Chair